Weekly Market Update: 7th July 2008

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The markets ended the volatile week on a high. The indices shrugged off a sluggish start and powered ahead to close with handy gains. Nifty closed at 4,016 up 90 points, while the Sensex shut shop at 13,454 up 360 points.

Volatility is also likely to continue in coming week. In the near term focus may shift to earnings season as IT bellwether Infosys Technologies kickstarts June 2008 quarter earnings season on Friday, 11 July 2008. However tough macro economic environment comprising high inflation, record high global crude oil prices and rising interest rates will continue to weigh on the sentiment in near term.

The market sentiment will also remain under pressure in view of fluid political situation at the Centre after Left, the key ally of the UPA government, hardened its stand on the Indo-US nuclear deal threatening to withdraw support from the government, if it moved ahead to operationalise the deal.

However, market analyst’s feels that selling, which is coming from hedge funds, is tapering off because most of the redemption pressures which are there on them are over as of now. So, there is not too much of selling coming from Foreign Institutional Investors, or FIIs. It is possible to hold around 12,800 levels for the time being and try and inch up to 14,000-14,500. The reason for this is that inflation, to the level of 12.5-13%, is discounted by the market to a certain extent. Secondly, on the political front, things are slowly clearing up and by next week it should be very clear what sort of support is there. Again, India's monsoon has been 21% above average so far this season. A normal monsoon may lift farm production, which accounts for a fifth of the economy, and cool the nation's fastest inflation rate in 13 years.

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